South Korean pension to buy Gatwick stake

The National Pension Service is planning to buy a 12% stake in London’s Gatwick Airport from Global Infrastructure Partners for £100m. The move is part of the pension’s aim of quadrupling its international exposure as it expands its portfolio from $240bn to $400bn by 2014.

South Korea’s National Pension Service, the world’s fifth-largest pension fund, is close to concluding the purchase of a 12 percent stake in London’s Gatwick Airport, a source close to process confirmed to InfrastructureInvestor.

 

London's Gatwick Airport

The source said that the sale was always part of Global Infrastructure Partner's (GIP's) plans but did not know if it more divestments were to come. He also added that the South Korean pension was not a previous investor in GIP. Michael McGhee, a partner at GIP, had raised the possibility of an “equity syndication” in an interview last December.

GIP followed a similar strategy after it acquired London's City airport, selling a 25 percent stake in the airport to New-York's Highstar Capital.
 
Jun Kwang-woo, the Korean pension’s chairman, told the Financial Times in an interview that the investment would cost it a little under £100 million (€114 million; $159 million). A spokesman for the pension subsequently confirmed the purchase to Reuters and said an agreement would be signed next week. A spokesman for GIP did not comment on the news.
 
Gatwick airport was sold by Spanish group Ferrovial late last year to GIP for £1.51 billion. That price was a discount from its £1.8 billion regulated asset value and a far cry from the £3 billion analysts said it could have fetched before air travel took a turn for the worse. 
 
Kwang-woo said that 45 percent of the transaction price will be financed with bank debt. He said the Gatwick stake was part of the pension’s effort to quadruple its international exposure. The pension aims to expand its overall portfolio from $240 billion to $400 billion by 2014 with the UK being a prime target. “We consider that investments in the UK represent a good buying opportunity despite a relatively slow recovery from the global crisis,” Kwang-woo said.
 
The South Korean pension also plans to increase investments in infrastructure, real estate and private equity funds to 6.4 percent this year from 4.5 percent at the end of last November. The pension first came to the attention of the UK’s financial community last year, when it bought HSBC’s Canary Wharf headquarters for £773 million.